Russia's economic crisis deepened as the government acknowledged it's heading for recession and a former central banker spoke of "some panic" in the financial system as oil prices plunged.

Speaking a day after President Vladimir Putin said Russia is scrapping a proposed $45 billion pipeline to Europe, the government predicted the economy will contract next year and canceled a bond auction. It was also forced to pledge 39.95 billion rubles (US$740 million) to support OAO Gazprombank, at least the third lender to secure a capital injection since U.S. and European Union sanctions curbed their ability to borrow.

The economy is succumbing to penalties imposed over the conflict in Ukraine as the plummeting ruble stokes inflation and a 30 percent drop in oil prices erodes export revenue. Russia may enter its first recession since 2009 in the first quarter, according to Deputy Economy Minister Alexei Vedev.